As retailers continue to suffer from low profits and even lower business confidence, many have been reduced to financial distress, and in some severe cases, insolvency. Financial distress can be eased through intensifying the scrutiny of business finances, but few business owners pay close enough attention. Recent company collapses, such as Carillion, occurred due to overlooking profit warnings and clear signs the company was in distress.
A new report from insolvency specialist Begbies Traynor has revealed that more than 470,000 businesses felt the pinch at the end of June. With Brexit negotiations still underway and the political climate still uncertain, the environment for businesses and consumers alike is unlikely to improve.
Stunted wage growth and skyrocketing business rates have placed pressure on household budgets and subsequently have squeezed consumer spending and impacted consumer-based business sectors. Retailers and service sectors have in particular seen numerous branches close down or undergo severe restructuring procedures.
As a business owner, you cannot control economic behaviour, but you can prepare for the trajectory of your business. At the Credit Protection Association, we encourage our Members to ensure their finances are strong enough to take advantage of positive market behaviour as well as handle the downturns.
Those based in London are struggling the most. The capital was the country’s worst performing region, with the rate of firms facing serious financial difficulty rocketing 17pc compared with June last year.
Since January retailers including Poundworld, Maplin and Toys R Us have plunged into administration while House of Fraser, New Look, Mothercare and Carpetright are in the midst of restructurings.
There has also been a painful crunch in the restaurant sector which has forced chains such as Carluccio’s, Byron, Jamie’s Italian, Strada and Prezzo to draw up rescue plans and Gaucho Group to appoint administrators.
